It is reliably reported that George Osborne will say later today that:
“But the biggest risk is that people think that it's ‘job done'. Many in our politics encourage this, irresponsibly suggesting that we can just go back to the bad old ways and spend beyond our means for evermore. Though the year is only seven days old, already we hear their predictable calls for billions of pounds more debt-fuelled public spending. They reject all the reforms we propose to deliver better-quality public services for less taxpayers' money.
“Today I want to issue this warning: unless we finish the job of fixing the public finances, to get Britain back into the black by finally spending less than we borrow, all of the progress we have made together could still easily be reversed.”
He will do so in the context of discussing the risks the UK economy faces in 2016. I have, of course, already outlined many of these on this blog. What is interesting, in a macabre sense, is the problem George Osborne is creating for himself, and so, unfortunately, for the rest of us.
In summary, around the world there is an economic crisis developing because of a shortage of economic demand, a lack of investment by both business and government and a consequent excess of savings amongst those who could otherwise be spending. The latter is true amongst those with sufficient income to save and on the part of some nation states, e.g. Germany, China and Japan. The result of this lack of demand is a recessionary environment.
As I have shown in my work with Prof Ronen Palan, this recessionary environment is exacerbated by a lack of government spending. What I have called 'austerity stress', which is a perceived lack of wellbeing as a result of declining government spending per head of population, will hit in very real terms over this parliament in a way that it did not in the last, because the decline was much smaller and later in that parliament's life. This has a real impact: as government measures to curtail the social safety net increase the need for each person to save individually to manage the perception of that threat also increases. This increases the inclination to save and induces yet more lack of demand in the economy.
George Osborne's economic policy is, then, designed to exacerbate the obvious downward cyclical trend in the UK and global economy at this point in time. At the precise moment when the economy needs investment more than anything else, in flood defences and onwards, and at a time when we do as a nation not only have the capacity to deliver that investment because there is a shortfall in demand for other goods and services, but also have the means to fund that investment because borrowing costs are, for the government, little above zero per cent in real terms right now, George Osborne is saying he will not make any effort to help the UK economy by undertaking that essential investment programme.
He is instead saying that when demand is weak he will make it weaker.
And that when investment is needed he will not undertake it.
And that at a time when people want to save he will deny them access to the savings product they most want to buy more if, which (collectively) is government bonds.
In other words, what George Osborne will applaud himself today for doing what is the exact opposite of what the UK economy needs and even wants.
And he says he will do that because he thinks it is more important that UK government borrowing must be cut, come what may. In the process he reveals his own lack of understanding of the political economy.
First, he is making clear that he does not understand that the government is the lender, guarantor, and even depositor of last resort. This is not a monetary role it has an option about. This is simply, as a matter of fact, the role any government that is responsible for its own currency has. George Osborne appears to deny this. What his speech makes clear is that he thinks the government can, and will act of its own volition and independent of the actions of all others in the economy. That is an option not available to it. Because it is the creator of money it does not have this option. I explained why, at length, here, so will not do so again.
Second, for the reasons noted in that same linked piece George Osborne does not seem to realise that if individuals, business and the overseas sector all decide to save in sterling terms then he has no choice but be a borrower. That is because double entry simply requires it: every saver requires a borrower and as the creator of money the government will be that borrower come what may if everyone else saves, and so the option of balancing his books in this situation is not available to George Osborne. All he can do by trying to shrink the economy (which is what cuts do) when everyone else is seeking to save is guarantee that government borrowing will continue but GDP will shrink by more than was necessary.
So, in a nutshell, George Osborne is going to announce today that he has intention of increasing the threats to the UK economy, and say that this is the right thing to do. If that is a long term economic plan it is, I think, the last one that any government should be offering, especially now, when the threats are so big.
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Shouldn’t our opposition MPs and press be making these points?
Of course
But it does not stop me saying them too
Absolutely, I’m not complaining that you are discussing it. Quite the opposite. It seems to me that in order to be successful the political left needs to make these arguments loudly and continuously. Winning the economic argument, or perhaps even just challenging the prevailing consensus enough that ordinary people question it would seem the obvious priority to me. I’m just disappointed we haven’t had more challenging of the ‘accepted’ rhetoric from the opposition benches and in the media.
Apparently, Stephanie Kelton of MMT at Uni of Missouri has been advising Bernie Sanders and has not pushed the unrestrained nature of the currency issuer and taxes don’t fund anything line lest Sanders appear ‘unhinged’ to the general public – so it looks like there is an Overton Window issue here which IS being heeded in the Sanders Campaign-I’d like to know whether this is the case with Labour in the UK, in the sense that if it is a CONSCIOUS policy then that would be preferable!
I suspect not
“I suspect not”
Same here, Richard which is worrying to say the least.
“Shouldn’t our opposition MPs and press be making these points?”
Absolutely, but you’re assuming that they not only understand, but agree with the MMT behind them.
I know that our host has advised the opposition camp in the recent past, but have they really “got’ this message?
And. if so, will they make any attempt to proselytise it?
And, if not now, when? I’m not very confident, I’m afraid.
The biggest threat to the UK economy is Osborne himself. He chooses to ignore the power to deploy resources that is available to a fiat currency issuing government.
A sovereign FIAT currency ISSUING economy and its consolidated central bank, can’t go broke / default, in its own currency; it has a bottomless pit of the stuff. There is never a bill, presented in its own currency, that it can’t pay. There is no good or service, for sale in its own currency, that it can’t afford to buy.
We came off the Gold Standard decades back! Government bond markets since then are secondary and parasitic for sovereign currency issuing government Treasuries. They are trade-able savings certificates for risk free punters. Sovereign currency governments do not have to issue debt instruments because they don’t have to borrow their own currency from anybody. (But they do if they are a USER of a foreign currency, the Euro for instance, like Eurozone members).
The central bank can’t create new “money”, that is, net increase the quantity of “fiscal assets”, in the non-government sector, only the Treasury, the currency ISSUER can do that. It can (a) swap government debt back into the “reserves” (previous government spending), that bought the debt, from the Treasury in the first instance (now called QE when done in large lumps). (b) It can lend against collateral, like any other bank. Like all commercial bank lending these (horizontal) transactions always sum to zero. For every asset there is an equal and opposite liability.
The above is nothing to do with, increasingly irrelevant, NK macroeconomics; it is basic fiat currency accounting. Can I recommend you have a read of the Whole of Government Accounts (WGA) https://www.gov.uk/government/publications/whole-of-government-accounts-2013-to-2014
If the UK was a currency USING corporate entity, you will see from the WGA that in IFRS terms, it is insolvent. It has over £400 billion negative working capital and its liabilities are about twice its assets.
Alas, not a problem. The beauty of being a sovereign FIAT currency issuing economy is that the UK Treasury can use its own credit card to pay off its own, same, credit card.
PS. The “deficit” that Osborne ends up with this year, will be the amount the non-government sector households and firms, have decided to save and not let him have back in taxes. The so called, government ” national debt” is the non-government sectors “national savings”. We may get like the Japanese, they save near everything, which is why their government has over 2oo% debt to GDP ratio.
“The so called, government ” national debt” is the non-government sectors “national savings”
Which is why people like Frank N Newman (http://neweconomicperspectives.org/2013/10/former-dept-secretary-u-s-treasury-says-critics-mmt-reaching.html) would prefer to call it National Credit.
In a nutshell, then, the principle threat to the UK economy is one Osborne, George.
Well, his policies
I don’t want to make this too personal
Well Quakers always hold the ‘light’ is in there somewhere but Osborne’s darkness is pretty much smothering it!
It’s very hard to know whether these people REALLY believe this stuff or are taking the piss out of a dumbed-down populace. Which is worse?
They do both
I suppose the small silver lining is that, as we know, being a Marxist (Groucho Tendency), Osborne does have other policies – wait until 2019 or so and we’ll start to see them again.
It will be interesting to see if there is a global recession whether the good people of Utrecht and 19 other municipalities fare better with a Universal Basic Income than the good people of the UK suffering from the vagaries of an over-complicated and unfair benefits system which does not incentivise socially useful work.
http://www.theguardian.com/commentisfree/2016/jan/07/basic-income-royal-family-living-wage-economy
There are many advantages of introducing a Universal Basic Income. It would generate a feeling of well-being and social confidence which can ultimately change the way a country operates and is viewed internationally. It would greatly simplify benefits payments and could also incorporate the state pension.
There would of course be some who would take advantage of it, but that small group already exists and a wealthy nation is big enough to carry that burden on its shoulders.
We know from other areas of your blog, Richard, that the Treasury can produce the funds to cover this but a decision would have to be made regarding the initial weekly amount.
The mechanics of the process described here, basic double entry book keeping in which the Government has to run a deficit if everyone else is to be in surplus, also works the other way around ie if the Government is to achieve a surplus everyone else must by definition run a defecit.
Of course, as the economy shrinks as a result in pursuance of this objective, there are an increasing number of people already facing this position. The scale of private sector debt levels dwarf those of the UK Government. Although it is worth noting that certain sections suffering private debt problems (mostly of their own making) are regularly being bailed out by the Government using public money. Current money printing policies, now euphemistically referred to as QE, being a case in point. Some private sector debtors are more equal than others and the ring fencing and special treatment of this group results in increasing debt burdens on the rest of us as well as a crumbling infrastructure and shrinking economy.
However, an interesting point to consider, given that Osborne is adament he intends to
pursue this policy over this Parliament and beyond, is how he might go about to achieve it, a Government surplus that is?
Yes, it makes no sense in every way. Yes, it can only be done by impoverishing everyone else. However, so many other policies pursued also make no sense. From the uneconomic insistence that fracking takes place when the price of oil is dropping like a lead brick as as result of slowing economic demand in shrinking economies through to printing money to shore up the finance sector whilst killing off the productive manufacturing sectors.
The point is that a Government surplus can only occur if the Government/establshment takes steps to ensure everyone else, apart from the sectors it has clearly signalled it intends to protect, is forced into defecit. Shrinking the economy in the way that it already is will surely be insufficient to achieve this objective?
Consequently, the question becomes how such an objective could be achieved? What steps, policies, processes etc would a Government/Establishment committed (and it certainly should be) need to take to achieve an outcome in which everyone else, except those too big to take on, is in defecit sufficient to produce a Government surplus as though it were merely a household?
This question needs to be considered because these buggers are daft enough and malevolent enough to try and achieve that objective of a Government surplus and the only arithmetical way to do so is to take money directly and indirectly off the rest of us. This being the case it would seem to be a worthwhile exercise in anticipating the mechanics and process of how they might go about such an endeavour.
“Yes, it makes no sense in every way. Yes, it can only be done by impoverishing everyone else.” You may have missed this Dave but I’ve said here for years that Cameron and Osborne, being creatures entirely of privilege, in power will seek only to underline and reinforce that privilege by impoverishing the rest of us. Voila! Makes perfect sense to me.
You’ll get no argument from me on that point Bill.
What I am interested in is the mechanics of how they would go about achieving that objective (given that the debt is on present monthly statistics actually increasing). What methods and policies would be required over and above what we already have? – because with Government debt increasing what we have so far is not achieving that objective, despite all the pain.
Income and corporation tax rises do not seem options Osborne et al are willing to pursue. Privatisation of remaining State responsibilities – NHS, Education, Emergency Services, Policing, Security Armed forces, Social Security etc. – may or may not be enough. It would probably be a worthwhile exercise to figure out what possibilities could be on the cards (so we know what may be expected) above and beyond the total disappearance of all State responsibilities necessary, but perhaps not sufficient, to achieve a Government surplus.
Perhaps such considerations could be at the root of some of the, seemingly, more crazy flags we have seen run up the pole in the past year or so – such as negative interest rates and abolition of cash?
I like that Dave
I make no promises but I like the idea
Sounds like an Ivan Horrocks project too
Indeed, Richard, it would be something I’d be interested in looking into (I noted a previous reply from you in another blog about another project I might have been interested in). Came May/June when the bulk of the authoring of my new module is out of the way, and my PG research module ends (marking, etc, etc), I’ll have a rather large chunk of study leave to start to use up, so then yes, because I agree with Dave that in policy terms (ie. the mechanics) I can’t see how to square the circle of the Tory project re delivering both a minimal state and surplus. I have to say that my present thinking is that this cannot be done and that at some point around late 2018 (probably that Autumn Statement) we’ll see the beginning of a concerted campaign to explain this away and create and new narrative, with the active connivance of the majority of the media. Underpinned, of course, by the various changes to the electoral process that will gift the Tories an inbuilt advantage in 2020.
All too likely…
Dave-as people get more in debt and as more and more fall through, or past, safety nets that are pulled from underneath them-the Government mantra will be that ‘WE JUST HAVEN’T WORKED HARD ENOUGH.’ This myth still works in America despite the evidence.
Obama put a tariff of up to 263% on imports of cheap Chinese steel, protecting the American workforce. Osborne shrugs and accepts defeat, shuts down steel factories, throws working men on the dole where they increasingly are denied the components of life support, money, shelter, health care, even food (witness the endless parade of the sanctioned). Where he can remove security, he does. The objective is clear, a nation composed only of serfs and oligarchs.
George could care less about economics.
His interest/s lie elsewhere.
Economics is a tool to be used for political advantage.
So a few people, who do not matter to him one jot, get flooded out. He should care?
Any votes lost in it?
I don’t note any press/media baying for his blood, or the conservatives blood.
So, it’s on with assuring that a large slice of the £100 billion NHS pie is donated to carpetbaggers like virgin and circle, or whatever US hedge fund is also in the race…disabled claimants are put in the care of a US company “famous” for its $30 million dollar settlement for “benefit” fraud in the USA.
We are putting the fox in charge of the henhouse…..and georges mates are getting vastly richer out of it.
And you still think he’s economically incompetent…politics covers economics.
Labour, of course, is heavily involved in inserting its own head into its rectum, something it has done extremely well for a decade. They talk about opposition, do no opposition, except for their leader, who is quite good at baiting call-me-dave (not too difficult given his obvious mental shortcomings), but useless at people skills.
Business as usual then?
George is not incompetent
His economics are
I agree he has ulterior motive for promoting them
Richard-Osborne was and is an appalling communicator with virtually no interpersonal skills whatsoever. I can remember his early days promoting the ‘shirkers/skivers’ bullshit to young warehouse workers looking nervous and ill at ease. The Green Party Candidate who stood for Osborne’s constituency, Tatton, said she found him ‘uncomfortable in his own skin’ and just could not ‘connect.’
John Harris gives a good description of his constituency:
“In a way, Tatton is Osborne’s vision of Britain made flesh. Though the route of his beloved HS2 line miraculously bends around most of the constituency, it will still plough through countryside on its western fringes. Just beyond the seat’s northern limit is the patch of land set aside for an £800m extension of Manchester airport called “airport city”, joint-funded by Chinese money, something proudly announced by the chancellor in 2013. You can see where Tatton fits into his concept of a northern powerhouse: the whirring of machines, laying of roads and railways and all-round economic magic will happen elsewhere, but those who do well out of it will spend their free time in places like this, cloistered their condos, serviced by an ever-expanding leisure and hospitality industry, and presented with no end of opportunities to spend their money.”
Osborne is not saying and doing this without the Treasury being on board, Richard, which means that it remains the case – as has been so since the Tories were elected in 2010 – that shrinking the state remains the priority of the most powerful department of state and takes precedence over all else, regardless of the outcome across all policy domains, the public sector more generally, and, as you make clear in your blog, the UK economy and society as the contextual “collateral” (damage).
This does of course, lead us down the road that the recent floods illustrated well. That money can and will be found (or at the least promised, though as we now know, often then withdrawn) in response to disasters, or knee jerk reactions to the (threat) of terrorism, or as bail outs and hand outs to favoured interest groups (such as very wealthy landowners with grouse moors). In short, in the austerity (minimal) state policy is only based on either idealogy, short/immediate term responses to real or perceived disasters/threats, a PR requirement, or a combination of these.
It brings to mind the response from a spokesman for the US gun lobby being interviewed by Jon Snow on C4 News a couple of evenings ago. When asked about the number of killings by guns this year he replied (on more than one occasion) to the effect that these things happen in a free country. In short, “shit happens, get used to it”. That comes as near as I can get to summarising the attitude of this government across all areas of society – apart from where it impacts big business and the rich, of course. It may well be a fitting epitaph for Osborne in particular and this government in general:
The Tory Government 2015 – 2020. RIP. “Shit happens, get used to it” (but not for our rich mates and big business).
Which suggests the obvious line for an effective opposition
First, shit need not happen
Second, let’s build a shovel to get rid of the shit that happens despite that
🙂
And something for the warring factions in the Labour party to consider sooner rather than later and get on with doing pronto.
Don’t forget the pitchforks.
“Shit happens, get used to it” (but not for our rich mates and big business)”
But this is how a large percentage of the world lives, and has always lived – and the capacity of human resilience to survive the most appalling privation without complaint is what allows, and has always allowed, the most powerful to get away with it.
The Tories simply appear to want to restore the status quo to what it was around 200 years ago – when Britain was like any other poor country today, characterised by a small rich elite, and a massive, struggling underclass – that knows its place.
A natural diminishing of the generations who can actually remember a fully-functioning, unionised, welfare state and the concept of real ‘social security’, combined with an increase in both a permanent and transient immigrant working population for whom anything is better than what they have left behind, and who would be very shy to protest, both conspire to allow this gradual erosion of the post-war settlement.
Given enough time, there will be no-one left in the UK who can even remember how things were, could, and ought to be.
This is frightening.
I agree they want to set society back hundreds of years but I doubt they’ll be able to put that particular genie back in the bottle. It’s wishful thinking on the part of some unimaginative inexperienced overgrown schoolboys.
Ivan-it’s not really a shrinking of the state but a shrinking of the Welfare State, which is a different thing-in other respects we’re seeing a strengthening of the state in regards to protecting the financial sector and concepts of private property.
The Tory MP, Jesse Norman, wrote a book on Edmund Burke the late 18th Century Oligarch so shocked by the French Revolution that he became a defender of the Aristocracy and saw rights as ‘rights from’ rather than ‘rights to.’ I’m sure Burke would have been disgusted by being compared to Thatcher , a comparison which Norman makes and modern Tories cannot make an appeal to God and Nature in the way that Burke did – this has been replaced by a bogus metaphysics of money and meritocracy iterating towards eugenics
Simon
I disagree: this is a shrinking of the state as well as the welfare state
Richard
I note Richard’s response, Simon, and have to say I would have said the same had I responded sooner. The welfare state was the initial target – or at the least, the most remarked on target and perhaps remains so, but if you look across all departments of state, including the military, and all aspects of local government they are all marked by “shrinking”. I think this is where what we see now differs considerably from the form of ‘the free economy and strong state’ that was a mark of the Thatcher governments.
I accept that-I suppose I was influenced by such phenomena as:
Increases in the surveillance of the unemployed (involving staff increases)
Security surveillance
Bank bailouts
It’s in the Maintenance of neo-liberalism that the state appears strong -so you get the paradox of the state intervening to give the impression of its own dismantling but will be LARGE when it comes to protecting financialised property rights.
Is he really going to say “finally spending less than we borrow”? Because I’m pretty sure that’s not what he means.
How appropriate that Gideon’s economic jargon has changed from “the march of the makers” (big oops there) to “cocktail of threats”. Didn’t he read History at Oxford? Perhaps he skipped the 1930s.
To get the answer to some of the more bizarre/extreme policies of Osborne/Cameron et al. you only have to apply the logic of reflexivity to any such politicians who:
a) believe in capitalism as the preferred/dominant economic system
b) are motivated by self-interest and driven by ego
c) have personal ambitions beyond the meagre salaries (compared to their peers in business) of a senior minister or PM.
Whatever social harm they do to this country and its proletariat is inconsequential just as long as this period in their career is a stepping stone to future financial fortune (or at least a secure retirement). They will say and do whatever it takes to curry favour with their future employers/partners/shareholders.
It would be an interesting exercise to track the post public office directorships/shareholdings/employment/earnings/wealth of every party leader, PM and Chancellor since WW2 – and compare it to some of their key decisions while in power.
Then there is the de-housing act……
What is to be done? Well, Chomsky, the inveterate activist, is worth quoting here:
“All over the place, from the popular culture to the propaganda system, there is constant pressure to make people feel that they are helpless, that the only role they can have is to ratify decisions and to consume.”
And yet:
“If you look at history, even recent history, you see that there is indeed progress. . . . Over time, the cycle is clearly, generally upwards. And it doesn’t happen by laws of nature. And it doesn’t happen by social laws. . . . It happens as a result of hard work by dedicated people who are willing to look at problems honestly, to look at them without illusions, and to go to work chipping away at them, with no guarantee of success – in fact, with a need for a rather high tolerance for failure along the way, and plenty of disappointments.”
The neoliberal agenda, as advanced Gideon Osborne and friends, is to be fought. I do feel the weight of history on our side, though. Having read Paul Mason’s Post-Capitalism recently, I believe there are forces beyond the control of the neoliberal elite that will fundamentally reshape human nature within our lifetimes. There are reasons to be hopeful!
Without hope we have nothing
Given Osborne’s record on the deficit I get the uncertain impression that, to some extent, he seems to be a false advocate of austerity, a fake. He talks the talk but his measures are arguably mild and cautiously measured. Partly for political reasons (maintaining popularity)and partly because he knows that anything more severe could threaten a deflationary collapse.
If this impression is true, one is left to wonder why he would do this: For me two possibilities come to mind: One possibility could be a targeted agenda whereby stagnation and austerity are used to shrink the size of the public sector as a proportion of GDP (by stealth). His contractionary policies are mild enough to ensure that nothing too drastic happens (or so he may seem to think). Talk of a recovery becomes the substitute for actual recovery and “living within our means” fails to explain why our means afford a standard of ‘living’ that is lower than it was in the past.
In the meantime the financial sector and the 1% and the are sustained by the continuous rollover of the same 375bn QE – and, the cannibalisation of the public sector. In that scenario miniscule interest rates remain indefinitely and miniscule rates of inflation are needed to ensure that real interest rates remain positive. That raises the 2nd possibility (or factor). Given that a 2% inflation target has been rejected by some (eg. Baker, Krugman) as being too recessionary and anti-employment, the new scenario would be even worse – a deliberate but unofficial target of 0-1%. Not an unofficial BoE target but an unofficial government target that flows (by necessity) from their low-growth policies.
The point of all this in the context of your post is to say that Austerity may not be a mistaken path to recovery but a deliberate strategy of avoiding it. A Kaleckian vision of stagnation and unemployment by design This smaller economy with its shrinking public sector appears to be serving the 1% rather nicely. It nonetheless carries risks. It is crisis prone and fragile (not a good combination). The contradiction of low aggregate demand and higher asset prices can’t be sustained indefinitely but it may the only option that neo-liberalism retains. A self-destructive end-phase that is dragged-out as slowly and cautiously as possible.
I think your suggestion falls well and truly into the plausible range
marco “A self-destructive end-phase that is dragged-out as slowly and cautiously as possible.”
I agree and this is what I expect.
The suggestion that the 1% are doing nicely out of current policies and that austerity may well be deliberately engineered to avoid recovery seems more plausible every day. Although perhaps ‘upswing’ would be a better substitute for ‘recovery.’
In his book on post capitalism Paul Mason argues that the cyclical up swings and down swings of capitalism, first posited by the former Soviet economist Kondratiev in the 1930’s, has stopped working. The system dynamics, in which concessions won by what was once called the labour force but which now seem to be encapsulated as the 99% drove investment to seek competitive advantage in new waves of technologies to achieve market advantage in roughly 50 year cycles is broken.
A line of progression based on productive technologies stretching from steam power, communications, electricity and electronics, aviation, mass production, internal combustion, computers etc which drove succesive cycles of capitalist boom which spread, albeit unevenly, wider benefits (including replacement jobs) seems to have stalled. By now we should be seeing an upswing based on some new technology equivalent in scale and impact, in its time, to electronics or steam power. So far all we seem to have is the Internet, which appears to rapidly degenerating into just another rent seeking opportunity.
One plausible explanation for the preference towards the domination of rent seeking over further development of technologies to provide the next upswing in the cycle may well be that it suits the 1% to halt the cycle at this point, stopping history as it were, in favour of some forms of technological feudalism.
Michael Hudson seems to agree; “Neoliberals want the kind of government that will create gains for the banks, not necessarily for the economy at large. Such governments basically are oligarchic. Once high finance takes over governments as a means of exploiting the 99 Percent, it’s all for active government policy — for itself.
Aristotle talked about this more than 2,000 years ago. He said that democracy is the stage immediately proceeding oligarchy. All economies go through three stages, repeating a cycle: from democracy into oligarchy, and then the oligarchs make themselves hereditary. Today, Jeb Bush wants to abolish the estate tax to help the emerging power elite make itself into a hereditary aristocracy. Then, some of the aristocratic families will fight among themselves, take the public into their camp and promote democracy, so you have the cycle going all over again. That’s the kind of cycle we’re having now, just as in ancient Athens. It’s a transition from democracy to oligarchy on its way to becoming an aristocracy of the power elite.”
And: ” So you have these fictitious economists given Nobel Prizes for promoting an inside out, upside down version of how the global economy actually works.”
ï‚ http://www.counterpunch.org/2015/10/05/parasites-in-the-body-economic-the-disasters-of-neoliberalism/
Let’s just hope that particular cycle has not, or is not about to, break down then Bill.
One of the problems for aristocracies (a minority/a 1% if you like) has been their dependence on serfs (a majority/99%) to keep them in the relative luxury to which they feel entitled and to compare themselves with in terms of their perceived superiority.
Pursuing a thought experiment for a moment: Consider a comparison between an average working subject of the realm today living in say an average terraced house and Louis XVI. Sure, Louis enjoyed massive relative privileges, with Palaces, land etc. However, he and his family required an army of flunkies/serfs to enjoy a great deal of what the average family take for granted today with no direct need to be dependent on loads of other people thanks to generations of technological development and support systems which are increasingly automated.
If the average serf existing under aristocracies such as pre revolutionary France were suddenly transported to the living room of me or thee, Bill, they would probably think we were minor royalty. The point being that for those of an aristocratic feudal mindset the gap is not big enough at present. Having to share the privilege of almost equal access to everyday comforts most of us got used to since the end of WW2 with the serfs is not something those of such a mindset find acceptable.
I recall watching a wildlife programme on TV a few years back which showed a troop of, I think, baboons living in a mountainous region on one of the Japanese islands. With snow during the winter keeping warm is an issue and the presence of hot springs aids survival. However, just as with humans the issue of RHIP kicks in. Only the ‘aristocracy’ of higher ranking baboons in the troop are allowed in, with other privileged members of the troop acting as bouncers to exclude the majority of the troop, including females and young, who have to endure the cold conditions.
That is how aristocricies like it. The question is, going back to Mason’s observation of a stalling of the latest of what has become known as the Kondratiev wave, has this stopped by design or accident?
Two scenarios present themselves if the thought experiment considers the former. Firstly, that current technology has reached a stage where the would be aristocrats, having considered the implications of the limits to the growth model which has driven Capitalism through its mercantile, industrial and post industrial phases, feels that sharing is no longer in their interests and they can now get along fine without those of us they now consider surplus to requirements.
Or, secondly, the next wave in the cycle which Mason identifies has been commandeered by the would be aristocrats as a prelude to reaching a point in which they do not need to have to depend on so many surplus, or even any, serfs to live like Kings.
The only downside from the point of view of those of an aristocratic mindset would be an eventual absence of comparison to help that mindset feel superior. However, the trade off of not having to share dwindling resources with a 99% may well be a consideration.
We won’t be the serfs. They’ll be Indians and Koreans imported for the purpose under Mode 4. There’s no need for us at all I can see. Over the next few generations and starting as as happened with the weakest, we’re being killed off. It’s difficult to doubt this when all evidence suggests it’s already started.
Good last point Dave where you hint at the psychology of ‘Schadenfreude’ as the basis of class difference. I suspect that Schadenfreude doesn’t apply any more where there are vast differences but only when the differences are more marginal, that is, there is a real fear of ending up like ‘them.’
The relegation of those on welfare as ‘surplus population’ (a term Marx used) is a hallmark of neo-liberalism and cries with it a neo-Cartesian defenition of existence@ ‘I am financialised, therefore I am.’ One can then be rendered a ‘non-person.’ The suicides and deaths that have occasionally resulted from sanctions (DWP always denies causality) are, I think, evidence of this. Dave’s Baboon analogy is apposite because the sort of Evolutionary Psychology popularise since the 80’s (Dawkins, Dennet, Sam Harris ets) chimes in with neo-liberalism perfectly even though Dawkins considers himself on the Left, I think he is politically very naive and doesn’t connect his scientific reductionism with culture-a grave mistake in my view.
Simon,
When it comes to defining a surplus to requirements population it would seem reasonable to suggest that those (currently) on welfare represent merely the low hanging fruit.
Increasing automation, even down to local SME workshop level* and increasing introduction of intelligent systems which impact on the employment opportunities of higher level skilled technical workers combined with the stalling of the latest expected wave in the approximate fifty year upswing in the cycle of the past two hundred years or so means that jobs destroyed are not being replaced. This has long term effects which suggest a downward pressure on what existing and would be aristocrats view as those surplus to requirements.
An increasing number of young people under thirty are finding it impossible to produce another generation to follow them. Saddled with student debt; high property and rental prices; expected to save more for a pension in their old age (whilst at the same time expected to go into further debt to achieve Osborne’s Government surplus); and unable to find the employment sufficient to provide the necessary stability to start and bring up a family, represents a process by which populations further up the tree from the low hanging fruit can be further reduced.
Whether any current new and developing technologies can, like previous new technologies, squeeze more out of less to sustain current levels of the 99% at a period when finite resources are dwindling may well be a redundant consideration. Either way, existing (long term traditional) and would be aristocrats may well have made up their minds on that point. In which case it would seem reasonable to surmise that there may not be too many, if any, of the 99% who are not considered surplus to requirements.
* It is now possible, for an outlay of around $25k, for a small manufacturing enterprise, producing say windows or door frames or whatever else at that level, to replace say seven workers out a team of eight on the shopfloor with an intelligent automotive robot aping the movements of the remaining worker. Saving the wages, pensions and other labour costs of 87.5% of each manufacturing team.
Another tragically sad example of how divorced from reality this government has become when it’s brutal attack on welfare payments to sick and disable people causes this type of result.
DWP told woman she was not ill enough for benefit on day she died. Dawn Amos was sent letter about attendance allowance on day her husband agreed to switch off her life support machine
http://www.theguardian.com/society/2016/jan/07/dwp-told-dawn-amos-not-ill-enough-for-benefit-day-she-died
Staggering
And so systemic it cannot be aberration
Not only is the DWP’s disability benefits system cruel, but the ESA fit-for-work tests actually cost more to run than the amount they save in benefits
http://www.independent.co.uk/news/uk/politics/dwp-fit-to-work-assessments-cost-more-than-they-save-report-reveals-a6801636.html
Can there be any other explanation, except that the DWP & IDS are determined to make life harder for disabled people – even if it costs the Govt money?
Indeed-when it comes to ideology, the state is willing to increase its size, magically,although the overall goal is to decrease it.
First, are we really to believe that George Osbourne (HM Treasury, his economic advisors etc, etc) does not understand the economic impacts of such policies? Or is it that he does indeed understand the impacts, but is pursuing these policies in order to achieve other aims? The question is, what are the aims? I’m afraid, I have difficulty with the idea that he does not understand.
Secondly, I want to quiz you on the following wording:
“but also have the means to fund that investment because borrowing costs are, for the government, little above zero per cent in real terms right now”
The Government being the issuer of the currency, why would it need to fund its investment through borrowing? Doesn’t the Government borrow for other reasons, namely to control monetary policy rather than fiscal policy? Could you clarify, please? Thanks.
If Osborne does understand the economics he disguises it will
But I have made clear, there are ulterior motives for this
Re borrowing – EU law forbids direct funding
Ah, I see. Thank you.
“Re borrowing — EU law forbids direct funding”
But of course it doesn’t forbid ‘smoke and mirrors’ versions of sovereign currency creation like QE-the trick is to keep it opaque to the public.
Agreed
But it keeps purer non interest bearing QE out of the picture
The UK can modify the European Communities Act at any time.
The other way around it is to issue Gilts at 0% interest, and let the Bank of England pick them up via the GEMMs (who get a guaranteed turn by being the middleman).
It cannot modify it and remain a member of the EU
In theory 0% is possible
“It cannot modify it and remain a member of the EU”
Depends how the EU reacts. We are already violating it by running intraday overdrafts.
I say do what we want and explain why and then the ball is in the EU court.
Banking settlement happens at the close of the day. All books are in balance overnight and then the process begins again the next day. Right from the beginning of the day asset & liability management people are looking at developments and taking steps to bring everything together at the end of the accounting period.
It’s a balancing act.
I confess I cannot do.low your logic
I am familiar with clearance and repo
WhAt has that to do with the situation being discussed?
Recessionary environment?
Yes
How do you define a recessionary environment?
One where limited wages growth, stagnant invetsment and low levels of employment or high levels of underemployment exist along side a situation where inflation is constrained to provide maximum opprtunity for debt exploitation and rentier gain
Call it now
Very well put Richard-I’m giving a talk to my local CLP next month-could I make use of your useful definition-(attributed of course and maybe a bit of promo for your book thrown in! )?
Good luck!
And thanks
So you’ve given a list of descriptors and used them to define a recessionary environment, ignoring the one and only definition of recession which a sustained decrease in real national income.
And I wonder where your evidence for low wage growth and under/un-employment is. As far as I know, wage growth in real terms was 3% last year and our employment ratios – that is, stripping away population growth – are higher than before the crash.
If you wish to live in cloud cuckoo land please feel free to do so
In the real world your claims make no sense
Read Danny Blanchflower
There is no normative aspect to this. It is a matter of definition. A recessionary environment is an environment in which the economy is in recession. And a recession is a sustained decrease in real GDP. That’s it. You are wrong.
I am not wrong
I offered a definition that I argue is correct
That is all economics does
You can subjectively disagree with my subjective judgement
But there is no objective standard you can refer to. This si not physical science
You misunderstand the remit of subjectivity in economics. Normative parts of the subject occur in the analysis stage. But to make economic analysis, one need objective definitions.
We have a set definition of economic growth.
We have a set definition of an interest rate.
We have a set definition of unemployment.
We also have a set definition of a recession. It’s a sustained fall in real GDP.
You cannot simply redefine it and misuse it. If we have no definitive foundations, how can we usefully make normative judgements and compare them?
I assure you can
And I will
As we all do
It’s called the evolution of thinking
It’s what academics do, all the time
It’s how knowledge in areas which are entirely subjective – like economics – happens
And how do we judge them? That’s called judgement
This is exactly my point. Economics is a normative field and that makes it incredibly important to have a solid foundation of definitions such that when I say policy A increases C and you say policy B increases C, we both know what C is. You appear to have completely missed this point. To be able to have normative discussion, we cannot keep changing our definitions. A recession is a sustained fall in real GDP. That’s it. We can talk about what policies affect a recession and so on, but to do so we must know what a recession is.
For example, the timing of the Great Divergence. People disagree as to when it occurred, but the value of the discussion would be nullified if we kept changing what we defined as the Great Divergence.
Do you see?
I do not agree
You asked for a definition
I gave you one
And now you say I may not use it even though my meaning is clear and also distinct
You are just wasting time
Expect to be deleted
I see others are seeing that OzzyChan has an endgame in mind……
End equality.
End hope.
End health.
““Reduction in government consumption” is the distorting, dissembling phrase the Chancellor adopts to mean drastically reducing government spending on public services and support for the poorest in our community. That is the true purport of George Osborne’s description of the economy as “mission critical”
http://www.primeeconomics.org/articles/473tnddl4pak4eer7h6189oge47j82
@George
If you’re reading this, just a quick lesson in neoliberalism:
Getting into the black isn’t about spending less than you borrow. That’s really just a little bit too difficult – even for you!
“One where limited wages growth, stagnant invetsment and low levels of employment or high levels of underemployment exist along side a situation where inflation is constrained to provide maximum opprtunity for debt exploitation and rentier gain”
Becomes:
“One where limited wages growth, or wage shrinkage, alongside stagnant investment and low levels of employment, or high levels of underemployment, exist alongside a situation where consumer inflation is artificially constrained, and asset inflation rampant, to provide maximum opportunity for debt exploitation and rentier gain”
Lose-lose for people.
Win-win for parasites (I’m looking at you Richard B)
OK
On the basis that Osborne is doing what the banks want him to do, it would appear to make sense for him to move a proportion of low interest government debt to high interest private debt.